660. But with the agreement having been finalised
that seems unlikely.
(Mr Grant) We shall contractualise it within the existing
franchise so we shall contractualise a lot of those benefits early
on. They will sign that agreement, but obviously because we are
going to pay them for those additional benefits which would have
been paid for through the 20-year franchise anyway.

661. Last week the Chief Executive of GNER,
Mr Garnett, said to us that he believed that the current transitional
situation in the industry would delayby that I mean not
just the Railtrack situation but I also mean the two-year franchisesthe
implementation of new investment by around two years. Do you share
that view?
(Mr Grant) I do not share that view. On the major
projects we are trying to keep them moving. The two-year extensions
have been proposed to try to deal with some of the earlier problems.
I am not trying to say the investment on the major projects will
not be delayed but we shall keep them moving against the background
of the administration.

662. He gave us one specific example in terms
of rolling stock investment where he said that what the two-year
franchise had done was to make it impossible to order new rolling
stock because the rolling stock suppliers will not supply new
rolling stock to an organisation which cannot guarantee to be
still holding the franchise on the delivery date. What advice
have you received on that front and what are you doing about it?
(Mr Grant) I am not sure I understand that because
on the Mark 1 replacements, last year we were not sure who the
new franchisee might be, the rolling stock manufacturers were
very willing to sell us the rolling stock which we would then
make sure the new franchisee would use. There are methods available
to us to order rolling stock which we can then novate to a new
franchisee.

Dr Pugh

663. Arriva Trains Northern were granted a two-year
extension on their franchise and in effect that service has deteriorated
rather than improved. Arriva have been granted a two-year increase
on their franchise on Merseyside and it is still a chronic service
and I can assure you of that from personal experience. Given that
sort of body of evidence and given that it seems in principle
unreasonable to try to deliver a ten-year plan through two-year
franchises, what counter examples can you show me which would
persuade me in any way that there is any sense in persisting with
two-year franchises?
(Mr Grant) We have to look at the Arriva Trains' position.
The Arriva position was against a background of NTL who were the
franchisee at the time running into a lot of trouble. We did agree
to a two-year position with Arriva Trains Northern. As you know,
we have not been satisfied with the management efforts which have
been put in place in terms of cancellations and driver training
and we are proposing to fine them. The example I can give you
on a two-year extension is Midland Main Line where significant
benefits have been negotiated on a two-year extension. It is the
case that depending which franchise it is, whether it is in profit
or loss, a two-year extension may work.

664. That means it is counterintuitive. You
are actually saying there may be real benefits in a two-year franchise.
It is not just a necessary evil which takes place sometimes when
a previous company cannot deliver as in the case of NTL. You are
actually saying that there is a desirable factor attached to two-year
franchises.
(Mr Grant) There could be benefits.

665. Within a ten-year rail plan.
(Mr Grant) Within a ten-year rail plan.

666. To go back to the Merseyside situation,
the Passenger Transport Authority showed some enthusiasm for taking
a part in the franchising activity and taking the burden off what
are hard-pressed Strategic Rail Authority resources. Sir Alastair
Morton said he was reasonably sympathetic to that. Are you in
principle against it or do you have no in-principle objection
to it?
(Mr Grant) Mr Jenner has been dealing with it in detail.
We have never been against the idea of Mersey travel PTE taking
over the underground lines. There have been some discussions.
There are two ways we could achieve this. One is through primary
legislation and the other is through a transport works order.
We have had a lot of discussions with the Department and Mersey
travel PTE to try to move that ahead.

667. Turning to the West Coast Main Line, last
week Virgin Trains mentioned the issue of compensation if the
investment programme does not go ahead. I asked them directly
whether this would have any consequences for the fare paying passenger.
They said they were unrelated issues. A few days ago they indicated
that they were intending to put up their fares by 30 per cent.
Are they unrelated issues and should they be?
(Mr Grant) I suppose at the end of the day, when you
look at it from the Virgin business side, if the compensation
is not enough then they will look to see how they can survive
and fares may be one issue. That is very premature until we have
had a good look at what the business case is on the Virgin side,
because at the end of the day we hold the franchise with Virgin
and they in the future will have to pay considerable amounts of
money.

668. If they chose to relate the issue, if they
said they were not getting the compensation so they were going
to put up the fares, would you be understanding of that position?
(Mr Grant) We would not be understanding. We would
want to understand why they had to do it or why they wanted to
do it. At the end of the day we are also trying to make sure that
we do achieve the 50 per cent growth in passengers.

669. A 30 per cent fare increase would not help
that very much, would it?
(Mr Grant) That was exactly the point I was going
to make.

Andrew Bennett

670. It would solve the overcrowding problems,
would it not?
(Mr Grant) Hopefully the overcrowding problems will
be solved with the additional capacity on the West Coast Main
Line and additional trains.

671. You do not think the fares are too low
at the moment.
(Mr Grant) What we are proposing in the strategic
plan is to consult next year on four issues: passenger service
requirements, fares, capacity allocation and Channel Tunnel through
trains.

Chairman

672. Again?
(Mr Grant) Mr Jenner will tell me that this is an
ongoing requirement left over from the old days that we have to
consult again on it.

673. You have to do it. You do not reach conclusions,
but you have to do it. Is that it?
(Mr Jenner) It is a specific statutory requirement
on us to have a Channel Tunnel through train strategy.

674. A through train strategy; not a through
train service, just a through train strategy. I see. Had you thought
of reaching any conclusions beyond your strategy?
(Mr Jenner) Not yet, Madam Chairman. That is what
we intend to consult on next year.

675. How long has the SRA been looking at a
through train strategy?
(Mr Jenner) We have not started it yet. It is for
next year.

Chairman: You have not started it. You are going
to start next year. I shall come back to that in a minute.

Miss McIntosh

676. Returning to the question of Arriva trains,
Arriva replaced Northern Spirit for one year up until February
2001 and then had a two-year extension. My constituents are now
having to travel by bus as a result of this. I do not know whether
you blame the managers or a lack of drivers, but may I ask what
reassurance you can give us today that whenever franchises are
being renewed passengers will not be asked to travel by bus in
future? On the question of the £2 million, I understand that
the fine the SRA imposed was on deficiencies earlier this year.
Are we looking at a further fine on Arriva for this further deficient
service?
(Mr Jenner) The draft order we have published is in
two parts. There is a proposal for a £2 million for deficiencies
in driver provision over the past few months. There is also a
proposal that if they fail to train a sufficient number of drivers
per period going forward then there is an additional fine for
each driver of a failed train. Why we took the action we did on
Arriva Trains Northern was very much because we felt that consideration
of the passenger was not being given sufficient thought to. Services
were being cancelled on a completely random basis. What we are
trying to do is get back to the situation where although your
constituents may have to travel by a bus, at least there is a
robust service, they know what the position is, they do not turn
up at the station

Chairman

677. They do not have a train but they know
that there is no train. Is that your definition of a robust situation
for a train service?
(Mr Jenner) They know they have a service.

678. Come on, I am sorry, joking apart, Are
you saying that if they know there is a bus service instead of
a train service they know there is a bus service.
(Mr Jenner) They know that they are able to travel,
which I suggest is better than not knowing whether they can travel.

Miss McIntosh: First of all, they need to get
to work in Newcastle by a particular time. Employers do not accept
a bus service replacing a train service as a good excuse for turning
up late for work. Secondly, the Committee has heard evidenceI
am paraphrasing slightly but the word was usedthat train
drivers find it less sexy to drive an omnibus service such as
the Arriva Northern Service than the coastal service on either
the East or West Coast route. Is your ten-year plan going to take
that into consideration in trying to attract sufficient drivers
of trains in future?

Chairman

679. Whilst you are on it, what is your attitude
to Arriva poaching other people's drivers if you are actually
saying that you want them to train their own people? What timescale
are you giving them to do all this?
(Mr Jenner) On timescale, I think we are giving them
to the middle of next year to get back to a full establishment.
It takes over one year to train drivers. It is a long drawn-out
process, purely because they have to learn the route, they have
to be safety trained. Drivers do not appear overnight.